Correlation Between RF Materials and Hwasung Industrial

Can any of the company-specific risk be diversified away by investing in both RF Materials and Hwasung Industrial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining RF Materials and Hwasung Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RF Materials Co and Hwasung Industrial Co, you can compare the effects of market volatilities on RF Materials and Hwasung Industrial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in RF Materials with a short position of Hwasung Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RF Materials and Hwasung Industrial.

Diversification Opportunities for RF Materials and Hwasung Industrial

-0.36

Correlation Coefficient

RF Materials  Hwasung Industrial

Very good diversification

The 3 months correlation between 327260 and Hwasung is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and Hwasung Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwasung Industrial and RF Materials is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on RF Materials Co are associated (or correlated) with Hwasung Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwasung Industrial has no effect on the direction of RF Materials i.e., RF Materials and Hwasung Industrial go up and down completely randomly.

Pair Corralation between RF Materials and Hwasung Industrial

Assuming the 90 days trading horizon RF Materials Co is expected to generate 1.53 times more return on investment than Hwasung Industrial. However, RF Materials is 1.53 times more volatile than Hwasung Industrial Co. It trades about 0.61 of its potential returns per unit of risk. Hwasung Industrial Co is currently generating about 0.16 per unit of risk. If you would invest  472,500  in RF Materials Co on October 22, 2024 and sell it today you would earn a total of  94,500  from holding RF Materials Co or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

RF Materials Co  vs.  Hwasung Industrial Co

RF Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RF Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hwasung Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hwasung Industrial Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hwasung Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RF Materials and Hwasung Industrial

The main advantage of trading using opposite RF Materials and Hwasung Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RF Materials position performs unexpectedly, Hwasung Industrial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hwasung Industrial will offset losses from the drop in Hwasung Industrial's long position.

The idea behind RF Materials Co and Hwasung Industrial Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..